It’s time to force the banks’ hand - Mortgage crisis

ONE of the founding grandees of the BBC described public interest broadcasting as “making the popular good and the good popular”.

As the scale of the mortgage crisis is no longer avoidable, Taoiseach Enda Kenny might be wise to adopt a similar principle and make the legislative changes so obviously needed to address what seems a once-in-a- generation social crisis where nearly one in seven home mortgages are in difficulty.

He will not be criticised for confronting the banks but will most certainly be criticised severely, and he would deserve that criticism, if he does not intervene to end the banks’ veto on restructuring loan deals and to change insolvency legislation to allow people to hope economic recovery is possible. That criticism, although as yet indirect, has already come from his Cabinet colleague, Environment Minister Alan Kelly, who has suggested that the insolvency legislation would have to be changed and that the banks must be “forced” to engage with insolvency arrangements. Finance Minister Michael Noonan has promised that legislation will be “tweaked” if that is deemed necessary.

Labour’s Willie Penrose has tabled a bill aimed at resolving the issue by making self-declared bankruptcy even more effective in resolving personal debt problems. Fianna Fáil’s Michael McGrath has proposed legislation that would end the banks’ veto on agreements made with the help of the Insolvency Service to restore some sort of equilibrium between lenders and distressed borrowers.

Mr Kenny made another contribution to the conversation yesterday when he said that he would like to see the banks doing more for people in mortgage difficulty and that the Government did not want to see houses repossessed. “I’d like to see them — the banks— engage more. Clearly you don’t want numbers of people where this hangs over their head on a continuous basis,” he said.

All these fine words and gestures have failed and the banks have not shifted their position. Mr Kenny instinctively avoids confrontation but that trait is a hindrance as the banks have shown that they will use their position to their advantage, a situation recognised by the troika, as long ago as 2009, when they demanded that the State introduce insolvency laws that allowed feasible debt resolution for ordinary people.

It is time Mr Kenny used the mandate he was given and made it clear to the banks that they must do a lot more to avoid evictions — and if they do not he must change the legislation to weaken their hand. It goes without saying that this legislation must focus on family homes and that “strategic defaulters” must be left to the tender mercies of the banks and courts. The Central Bank reports that more than 110,000 home owners were in mortgage arrears at the end of 2014. This is a significant figure as there are just under 760,000 mortgages on private dwellings. The great majority of people caught in this trap are there because this State allowed unsustainable housing and credit markets develop despite the absence of measures to protect lenders or borrowers. Standing idly by as this crisis escalates is no longer an option.